Category: International Trade

Congress insults our intelligence when it tells us that Chinese currency games are to blame for our trade deficit with that country and unemployment in our own. Legislators might as well propose a fleet of men-o’-war to navigate the globe and collect all its gold: economics is not a zero-sum game.

We blockaded the ports of the Barbary pirates when they subverted the principles of free trade — is Ingraham looking for a similar response now? No, she wants weenier measures: just some punitive sanctions here and there to whip China back into shape (because those always work).

Conservatives who are looking through the Mercantilist spyglass have got to put it down, because it distorts economics in the same way Marxism does. Economic growth and expansion of the labor market don’t come by the redistribution of wealth; they come by allowing man to exercise his creative talents, to innovate, to produce.

Our leaders do the country a disservice by proclaiming that unemployment is caused by a trade deficit, and that a build-up of retaliatory tariffs is the way to fix the trade deficit. And they do other countries a disservice also, because U.S. protectionism hurts our trade partners (or potential trade partners). Holding back U.S. economic progress by artificially retaining manufacturing jobs, for example, means that workers in China or Vietnam are denied employment opportunities. It’s mindless selfishness.

There’s a saying that when goods cross borders, armies don’t (it’s the correlative to the observation attributed to Bastiat: “If goods cannot cross borders, armies will.”). The point is that trade tends to bring people together who might otherwise have cause to be hostile. One of the themes at Acton University, which begins in just a few hours, is globalization and various Christian responses. That’s sure to be the case again this year, as we have just about 70 countries represented among the various participants.

It’s within this context that I want to pass along a noteworthy story I heard yesterday on our statewide public radio station, Michigan Radio. It focuses on what automaker General Motors did when faced with parts shortages following the Fukushima earthquake.

GM added a local Japan-based “War Room” to its response, focusing on solving problems on the ground to get the supply-chain back up and running. As Tracy Samilton reports, “Once the suppliers became convinced GM wasn’t there to dump them, they were awfully happy for their customer’s help. Whatever GM could do, it did. One supplier ran out of a special form of hydrogen peroxide. GM found another source for it and shipped it in from Korea. The company hired trucks.”

So when you have companies with global reach across borders and global supply chains to match, you get a different kind of “War Room,” those focused on putting “the links of the Japanese supply chain back together, often just in time to keep an assembly line from shutting down.”

As Samilton summarizes the lessons of the parts crisis, “People involved in the effort say they grew as human beings, grew closer to each other, met people in the company they might never have known. It was tough. But War Room veterans are keen to point out that they’re not the heroes of this story.”

Ron Mills, head of engineering at GM’s Tech Center, puts it this way,

“We all worked really hard here, but at the end of the day, I did go home, right? And I ate well, and people in Japan could not do that. They had to work hard and also go back and try to find food and clothing and shelter for them and their families and which – I was just in awe of how hard and how they were able to endure.”

The GM workers were driven both by a sense of self-preservation and need as well as genuine concern for their Japanese partners, a concern that became more concrete and palpable as the invisible hands up the supply chain became increasingly visible.

Over at the Comment site, I review Dambisa Moyo’s How the West was Lost: Fifty Years of Economic Folly—and the Stark Choices Ahead. In “War of the Worldviews,” I note that the strongest elements of Moyo’s work are related to her analysis of the causes and the trends of global economic power. “Faced with the combined might of the Rest,” writes Moyo, “the West is forced to grapple with a relentless onslaught of challengers from all corners of the globe. And all these countries are growing in confidence, gaining in competence, and jockeying for a frontline position in the world’s economic race.”

A recently released World Bank report echoes Moyo’s sentiments, which are broadly shared by many forecasts. As Motoko Rich at the NYT Economix blog summarizes, “A new report from the World Bank predicts that by 2025, China, along with five other emerging economies — Brazil, India, Indonesia, South Korea and Russia — will account for more than half of all global growth, up from one-third now.”

One way of understanding these trends is that it is simply what you get in an age of global competition. Nations like China, India, and Brazil are increasingly able to make sustained GDP gains because of increased access to global markets, particularly the US. And the US is forced to adapt to remain competitive, and in many cases this hasn’t happened. It’s not clear at all why all this is such a bad thing. After all, it’s not that the US will cease to be affluent in the foreseeable future. It’s just that other nations won’t be as relatively poor.

Even so, Moyo can’t help but cast these developments in negative terms for the West: “…even while globalization could contribute to a rising tide for all boats, it is clear that the relative quality of life will almost certainly have to decline in the West to accommodate a rise in the Rest.” Thus the relatively greater quality of life enjoyed in the West will decline compared to the Rest. But why must this be so dire for the West?

The weakest part of Moyo’s project comes through in her attempts to provide prescriptive guidance for the West to avoid this “precarious path of forecast decline.” All you really need to know about her suggestions appears in this line: “there is, after all, nothing inherently wrong with a socialist state per se if it’s well engineered and designed and can finance itself.”

Moyo wants the US to adopt the Chinese model of state-directed markets because of the “the speed with which policies can be taken and implemented.” Deliberative democracy is just too slow, too cumbersome, and too captive to special interests. We need a lean, mean set of government committees to run the economy properly and efficiently.

What’s difficult for me to understand is why, given the West’s historical success by embodying “a fully fledged capitalist society of entrepreneurs,” we should abandon that model. Moyo should instead be calling the West back to its strengths, its foundations in “democracy and the sanctity of the rights of the individual elevated above all else,” instead of issuing the siren song of state-driven capitalism. If it is really a competition between state-run and entrepreneurial “capitalism,” it’s not clear at all (as Moyo seems to think) that the statists will win.

It seems to me that the West will only truly be “lost” when we give up our commitments to the inherent dignity and rights of the individual, the rule of law, freedom of association, exchange, religion, and expression. The thrust of Moyo’s book is a classic, “It became necessary to destroy the West to save it,” project, and that’s one that’s simply not worth fighting for.

Work, for DeKoster, is “the form in which we make ourselves useful to others, and thus to God.”

I don’t discuss another point DeKoster makes in his book, Work: The Meaning of Your Life–A Christian Perspective, that relates to what results from the aggregation of individuals’ work. The answer is civilization: “Work shares in weaving civilization, which is the form in which others make themselves useful to us, by providing us with the tools for doing our work well.”

DeKoster points to the chair in which you sit while you read, or any of the other myriad objects that surround you, that could only have been produced by the contributions of countless workers through the assembly line and supply chain. Joseph Sunde over at Remnant Culture has a post up today that echoes this, focusing on the example of the toaster. His poignantly asks whether this illustrates “that free trade is primarily about collaborating and sharing? Hasn’t free trade shown that it holds great power for expanding, connecting, and shaping a global community?”

The best way to make the most of these truly precious resources of land, favorable climates and human labor is to grow lettuce, oranges, wheat, peppers, bananas, whatever, in the places where they grow best and with the most efficient technologies — and then pay the relatively tiny energy cost to get them to market, as we do with every other commodity in the economy. Sometimes that means growing vegetables in your backyard. Sometimes that means buying vegetables grown in California or Costa Rica.

I’ve never liked the idea that its somehow immoral for me or my family to consume mangoes, even though they don’t grow all that well here in Michigan.

And as Budiansky points out, the only way to grow them locally would be to invest large amounts of capital and energy in artificially transforming the climate (via a greenhouse, for instance).

This is to say nothing of the virtue of interconnectedness that comes about when, for instance, I buy mangoes that originate in India, China, or Mexico and someone else buys cherries grown here in Michigan.

There’s something in the Bible about “doing unto others.” If you want other people to buy stuff from you, visit your town, and so on, you ought to be eager to reciprocate.

Innes, an associate professor of politics at The King’s College in New York City, writes,

It’s admirable that people wish to better the lives of coffee growing peasants. I also applaud their use of private initiatives and organizations. But before scorning their neighbors for not sharing their means, and before trying to turn the world inside out and upside down on the basis of an adolescent “why not?” they should make sure that the vehicle they have chosen for their dreams actually does what it’s supposed to do, and doesn’t do more harm than good.

Check out Claar’s book for more on the intentions, challenges, and realities facing the fair trade movement.

I reached this conclusion on the basis of six months spent in China and extensive conversations with my Chinese friend and fellow Acton intern Liping, whose analysis has helped me greatly in writing this post.

China began moving away from Communist ideology under Deng Xiaoping, whose economic reforms disassembled communes and created space for private businesses. He justified these reforms to his Communist colleagues with the saying, “It doesn’t matter if the cat is white or black as long as it catches the mice,” implying that even “capitalist” policies were justified if they succeeded in bringing economic growth. And they certainly did. Since that time, China’s economic development has been tremendous, so now Chinese people overwhelmingly approve of the reforms.

Despite the success of the opening of China’s markets, the country has not completely embraced free enterprise. The PRC’s 60th anniversary celebration last fall featured signs boldly proclaiming, “Socialism is good.” The government still controls key industries such as oil and runs enterprises in many other industries.

Further, all land in China is owned by the government. Home buyers are technically only leasing land for 70-year periods, a policy established assuming that by that time, the houses will need to be rebuilt anyway. The government sometimes sells land inside cities to developers for vastly inflated sums of money, evicting the people who already live there. The remuneration that these people receive is frequently less than the value of the house, forcing them to find inferior housing elsewhere. These policies have made housing within cities prohibitively expensive for most Chinese people, forcing them to commute from the suburbs.

Despite these continued regulations, economic freedom in China has made significant advances compared to its previous completely collectivized state. Enterprise is permitted and even encouraged, as is trade with the outside world. As people come to recognize the benefits of free markets, more and more are becoming eager to participate, which will make it much more difficult for the government to restrict these freedoms again in the future.

However, this economic freedom does not imply political freedom. Deng Xiaoping, the same leader who had spearheaded the economic reforms, was responsible for the Tiananmen Square crackdown on protesters for political reform. That incident twenty years ago is only one of the better-known examples of the political suppression that still occurs today.

The government holds a monopoly on the media, dominates the flow of information, and censors any ideas it finds potentially threatening. It blocks access to web sites that range from information on tense political issues to social networking sites like Facebook and YouTube. When I was studying there, during a one-on-one session a teacher asked me what I knew about the Tiananmen Square massacre, admitting that due to censorship I probably knew more about it than she did. When we had finished the discussion, she erased all relevant vocabulary from the board, saying that she didn’t want anyone to know what we had talked about. Through the high school level and frequently afterward, students are indoctrinated with Marxist philosophy, and studies of literature are focused exclusively on nationalistic or patriotic themes. Political dissent is strictly censored, and dissenters are often denied work or restricted from moving or publishing their work.

According to Liping, most new members of the Communist party do not actually believe in Marxism; they just see membership as a way to improve their chances of finding a good job. Similarly, officials suppress opposing ideas, not because they are persuaded of the truth of Marxism but because they want to prevent dissent and opposition to their own party. Promoting Marxist ideas serves as a way to silence political rivals and to enforce popular support for their own rule. The first Chinese communists sought power to serve their ideology, but today’s Chinese communists use ideology to preserve their power.

The expansion of economic freedom coupled with the continued political repression may seem like a contradiction, and indeed areas with more trade connections like Shanghai also have more political freedom than government centers like Beijing. Yet fundamentally, this paradox exists because of the shaky foundation for what freedom they do have.

Deng Xiaoping’s justification for moving away from Communist economic ideology was based solely on pragmatic reasoning. He figured that since the Communist system was failing miserably, changing economic systems might bring prosperity, a prediction that has been proven true. Yet abandoning the one-party state did not have any such obvious benefits. In fact, retaining a monopoly on political power was in the leaders’ personal interest. They could even argue that it was good for the nation, creating what current president Hu Jintao euphemistically calls a “Harmonious Society” unified by common political beliefs.

In the West, arguments for freedom are closely tied to belief in individual rights which the government cannot legitimately violate. These beliefs originated in the Christian view that people have special dignity because they are made in the image of God. This foundation means that even if it would be expedient for the government to restrict freedom, it has no right to do so. Officials may not always act to preserve the people’s freedom, but in violating freedom, they behave inconsistently with their own ideals.

In contrast, the Chinese Communist Party is consistent in pragmatically following policies that they think will be beneficial, whether they increased freedom or not. Freedom can bring tremendous practical benefits, which is what one would expect of a concept based on a true vision of human nature. Yet these practical benefits alone do not constitute freedom’s foundation. The freedom the government gives pragmatically, it can take away when freedom is no longer practical, or when the benefits it provides are less obvious.

Thus, what China lacks is not merely policies that allow people to act freely but an understanding of the essence and importance of freedom. Freedom cannot be guaranteed by government pragmatism, but only by a genuine understanding of the rights of the people within the country, coupled with leaders who are willing to restrain their desire for power in order to respect these rights.

In this book, DeKoster makes a pointed connection between work and food:

“I was hungry and you gave me something to eat.”

The Lord is saying that where humans are hungry, there he too chooses to hunger. He waits in the hungry man or woman or child, longing to be served. Served how? By the work of those who knit the garment of civilization through the production and distribution of food!

God himself, hungering in the hungry, is served by all those who work in …

agriculture,

wholesale or retail foods,

kitchens or restaurants,

food transportation or the mass production of food items,

manufacturing of implements used in agriculture or in any of the countless food-related industries,

innumerable support services and enterprises that together make food production and distribution possible.

God transforms plantings into harvests. Then he waits to be fed by those whose work turns harvests into one of the basic elements of civilization. The gift of ourselves to others through work is the gift of ourselves to God—and this is why work gives both temporal and eternal meaning to life!

Many commentators on this passage in Matthew focus on the “giving” literally as the charitable act of giving, and this is as appropriate. But some others go on to identify the “giver” with the government, rather than charities, individual Christians, or the church itself.

But as DeKoster challenges us, we ought also to think of the “giver” as the person who works in the fields to harvest the food, who gives the sweat of their brow to bring food to the table of those of us who hunger, each and every day.

This shift in perspective, that sees our work as a form of service to others, a way of giving of ourselves to others, changes things completely. And I think it more accurately reflects the nature of market interactions and the value of human work.

As I contend, work is the regular means God has provided for the maintenance of our physical needs. And work that is connected to the larger human community becomes increasingly oriented toward the service of others and productive of civilization. Lester DeKoster defines civilization in just this way, as

goods and services to hand when we need them. There are countless workers, just like ourselves—including ourselves—whose work creates the harvest that provides each of us with far more than we could ever provide for ourselves.

The trend observable in LWF recent history looks to continue unabated. The newly appointed LWF general secretary, Rev. Martin Junge of Chile, has the pursuit of “economic justice,” conceived largely of opposition to globalization, as a high priority. (Full story after the break).(more…)

Bill Easterly has a brief reflection on the role of religion in global societies, a role that must be taken into account by development ‘experts.’ Speaking of his experience at an Anglican worship service in Ghana:

I think it’s something about how to understand people’s behavior, you need to understand how they see themselves. A good guess is that the people in the congregation this morning, in one of the poorest regions of Ghana, do NOT see themselves primarily as “poor” or “developing”, they see themselves as Christians. Another guess is that similar feelings about religious faith would apply to other Ghanaians in other religious services, like Muslims, Catholics, traditional religions, etc.)

Development efforts must take into account broader cultural, non-material concerns, and religion plays an enormous constitutive role in the formation of cultural worldviews. More important than how those in developed nations see those in the developing world is how those in the developing world see themselves. And as Easterly notes, most often they see themselves primarily as “Christian” or “Muslim” rather than “rich” or “poor.”